What is customer oriented supply chain management?

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Logistics podcast

In this episode of the KPMG Customer First podcast, host Lisa Bora, Partner within KPMG’s Customer, Brand & Marketing Advisory business, and her guests focus on the logistics sector, which is facing unprecedented challenges with the changing expectations of customers and heightened focus on delivery. They discuss long-lasting changes that retail and CPG sectors need to address, from last mile and reverse logistics to orchestrating eco-systems, the difficulties of fulfilment for small businesses as well as growing customer expectations and feedback challenges are all considered.

Supply chain transformation

In a customer centric supply chain, the front, middle and back office operations of an organisation must be seamlessly connected, and all departments must be working to a unified strategy.

However, Bora says achieving this can’t just be about applying a technology transformation, but requires a transformation that considers processes, people, culture, and, essentially, customers’ needs.

“Customers are from different segments with different needs, so when you look at the transformation, for some it’s about a fast service, so then the supply chain is critical. For others, it’s about delivering additional value and services, therefore maybe less logistics but more about value-added partnerships. Referencing the customer base to really refine the levers that matter to them, and then having your transformation strategy revolve around those levers, is critical,” Bora says.

Reducing the complexity of inventory across entire store networks and digital channels helps to drive efficiencies.

“It’s important not to add unnecessary inventory across all channels, nor create reasons for unnecessary mark downs or other stock challenges,” Bora says.

Staying ahead of customer expectations

When the supply chain is transformed to be customer centric, that is not the end of the road. It must be continually revisited to address evolving trends in customer expectations.

Bora offers the example of customers increasingly wanting ‘hyper-localisation’ (to ‘buy local’), which requires supply chains to be flexible, and to have access to a greater network of suppliers.

Another trend is the desire for ‘immediacy’, such as delivery within the hour. Combined with very flexible return policies, this can significantly impact supply chain logistics, and create cost complexities.

"How do companies manage the returns component of the supply chain when customers buy 10 items to try something on at home, but really only desire to buy one of these items from the start?” she says

Other growing trends include retail customers buying on consignment, or end-consumers using subscription or rent models.

“These dynamics will significantly change operational business models in the future, and the only way to effectively respond is by having a sophisticated supply chain aligned to all of these trends,” Bora says.

Industry leaders to watch

Bora points to online fashion retailer The Iconic as a domestic business with a truly customer centric supply chain.  

“It is an organisation that always provides a great example on committing to delivery as opposed to the promise alone. They have heavily invested in their expanded fulfilment centre at Yennora (NSW), and have created an automated picking and sortation solution that has improved their order fulfilment capacity by about 40 percent.”

An international example of a business aligning its brand promise to an excellent supply chain is cosmetics retailer Sephora, Bora says. Sephora uses data to predict buying behaviour, and to plan the supply chain accordingly.

“Sephora tracks trends related to your product consumption, then sends a message saying ‘your goods are due for replenishment soon’, and gives you options to renew both in-store or online, based on inventory detail. This is a great example of personalisation, from a brand and customer experience perspective, but also connecting the supply chain perfectly,” she says.

The Sephora example shows that leading organisations don’t just ‘react’ to changing customer expectations, but they set new industry standards.

Bora points to another fashion retailer, Everlane, which promotes sustainability and transparency as part of its brand promise. To support this, it uses track and trace capability throughout its supply chain to reveal to its customers the origins and journey of its products.

“Their supply chain performance is actually a part of the customer experience,” she says.

Greater profitability

A customer centric supply chain should help foster stronger customer loyalty, and ideally greater profitability.

“This is reinforced by Forrester research that shows these organisations achieve two-times increments in performance. We also see that the top 50 customer-aligned organisations have the strongest EBITDA returns,” Bora says. 

Still unsure how to create a customer centric supply chain?

Download our eBook to learn more about how KPMG can help you create a customer centric supply chain of the future.

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